In a landmark transaction reflecting continuing consolidation and investor appetite in the Canadian financial sector, First National Financial Corporation (TSX: FN) announced today that it has reached a definitive agreement to be acquired by private equity giants Birch Hill Equity Partners and Brookfield Asset Management in a deal valued at approximately $2.9 billion. The deal, conducted through a newly formed acquisition vehicle, Regal Bidco Inc., will see shareholders of First National receive $48.00 per share in cash, marking a significant premium and a robust exit for investors.

Deal Structure and Shareholder Implications

Under the terms of the agreement, First National’s founders, Stephen Smith and Moray Tawse, who collectively hold over 71% of the company’s outstanding shares, will sell roughly two-thirds of their stakes while retaining an indirect 19% interest each in the company post-transaction through an interest in the acquirer. The remaining 62% will be owned by Birch Hill and Brookfield. Common shareholders, aside from Rollover Shareholders, benefit from immediate liquidity and a premium of 15.2% and 22.8% over the 30- and 90-day weighted average trading prices respectively, as of July 25, 2025. This all-cash transaction also sets the company’s valuation above its 52-week high, underscoring the acquirers’ confidence in the long-term prospects of the business.

Strategic Rationale and Board Approval

The acquisition follows a comprehensive strategic review overseen by a special committee of independent directors. The process attracted multiple acquisition proposals, culminating in a unanimous recommendation by both the special committee and the full board of directors (with conflicted directors abstaining). According to Jason Ellis, CEO of First National, “Birch Hill and Brookfield bring significant expertise in the Canadian financial services industry, and we are excited to partner with them to grow our platform, drive innovation, and deliver for our customers, employees and institutional partners.”

The Board’s approval was supported by independent fairness opinions and formal valuation provided by BMO Capital Markets. The offer was deemed to be within the fair market range of $44.00 to $50.00 per share and just in excess of a 16.5x price-to-earnings multiple based on the company’s latest trailing twelve months net income. The company’s significant historical performance—delivering approximately 2,149% total return since its IPO—underscores First National’s stature in the Canadian financial market.

Transaction Details and Next Steps

The transaction is not subject to a financing condition, a notable assurance for shareholders. It is structured as a plan of arrangement under the Business Corporations Act (Ontario) and will require approval by two-thirds of the company’s shareholders, as well as a simple majority of shareholders excluding the Rolling Shareholders, in accordance with Multilateral Instrument 61-101 (“MI 61-101”). Regulatory clearance under the Competition Act (Canada) and Ontario Superior Court approval are also required.

The Rolling Shareholders have entered into irrevocable voting agreements, ensuring their support for the transaction. Meanwhile, executive management, representing a small additional stake, have also entered into voting agreements. The company expects to hold a special meeting of shareholders in September 2025, with closing targeted for the fourth quarter of 2025. Following completion, First National’s common shares will be delisted from the Toronto Stock Exchange, while its preferred shares (FN.PR.A and FN.PR.B) will remain listed, and company noteholders will be redeemed at closing at the applicable redemption price.

During the interim period, First National intends to continue its monthly cash dividend of $0.208334 per share alongside its regular preferred share distributions.

Strategic Implications for Canada’s Financial Landscape

This transaction is significant for the Canadian financial services landscape. Founded in 1988, First National has grown to become one of Canada’s largest non-bank mortgage lenders, with over $155 billion in mortgages under administration. The company specializes in originating, underwriting, and servicing both residential and commercial mortgages for individual and institutional clients.

Birch Hill and Brookfield’s involvement brings two of Canada’s largest and most experienced private equity and asset management firms to the table. Birch Hill manages over $6 billion in capital, while Brookfield Asset Management, a global force, oversees assets exceeding US$1 trillion across real estate, infrastructure, renewable power, and private equity. This partnership is expected to fortify First National’s competitive position, facilitate new avenues for growth and innovation, and possibly accelerate further consolidation and technological transformation in Canadian financial services—a sector that continues to attract robust investor attention amid evolving digital trends and strong housing demand.

Market Context and Industry Trends

The acquisition comes at a time of intensifying competition in mortgage origination and servicing, with non-bank lenders continuing to erode market share from traditional banks due to their agility and focus on technology-driven service models. According to recent industry data, non-bank mortgage lenders now account for nearly 40% of new Canadian mortgage originations, driven by consumer demand for faster approvals, specialized products, and personalized service.

The Canadian housing market, while facing interest rate headwinds, remains structurally healthy, supported by strong immigration, urban demand, and an undersupply of housing in key metropolitan centers. Analysts predict that mortgage origination volumes are likely to recover in late 2025 and into 2026 as interest rates stabilize and demand rebounds, indicating strong upside potential for firms like First National under new ownership with expanded access to capital and strategic acumen.

Governance, Regulatory, and Fairness Provisions

The deal offers robust protection for minority shareholders, including a right for the Board to consider superior proposals and a break fee structure: should the company accept a superior offer, it will pay a $50 million break fee, while the acquirer is subject to a $75 million reverse break fee under defined circumstances. The fairness of the transaction has been confirmed by independent financial advisors, and regulatory oversight includes Ontario Superior Court review and Competition Bureau clearance.

First National’s senior management—led by CEO Jason Ellis—will continue in their roles, ensuring continuity for clients, employees, and institutional partners. The company’s operational headquarters will remain in Toronto, serving as a hub for its nationwide mortgage origination and servicing activity.

Advisory Teams and Financing

The company was advised financially by RBC Capital Markets, with legal counsel provided by Torys LLP. The Special Committee was independently advised by BMO Capital Markets and Blake, Cassels & Graydon LLP. Birch Hill and Brookfield received transactional advice from CIBC Capital Markets and Davies Ward Phillips & Vineberg LLP, with debt financing fully underwritten by a syndicate led by Canadian Imperial Bank of Commerce, RBC Capital Markets, and TD Securities. Initial commitments were joined by Bank of Nova Scotia and National Bank of Canada, underscoring robust lender confidence.

Outlook

The acquisition of First National Financial Corporation by Birch Hill and Brookfield represents one of the most significant private equity deals in the Canadian financial sector in recent years. As shareholder approval is sought and regulatory reviews progress, market participants will be watching closely for further signs of consolidation, innovation, and investor appetite in Canada’s evolving mortgage and lending space.

For more information about the transaction and First National’s future, visit www.firstnational.ca or refer to the full filings at www.sedarplus.ca.